Rolling US Economy Into The Shitbin Thread

don't want this to get buried because it is otm and has been previously discussed in some recent thread

DJI
Posted: 29 July 2020 at 21:39:13
Seems to me if you cancel rents for people, you should also freeze mortgage payments for the landlords. Seems simpler than trying to determine who is worthy of the relief.

yes this is it. it’s not complicated. is there a mortgage “holiday” in the us at all? in the uk there is until end of october i think (was extended from july)

― Li'l Brexit (Tracer Hand), Wednesday, July 29, 2020 2:46 PM

but bitter sad LOLs at the idea of the US doing anything as sensible as a "mortgage holiday", easier to dump 28 million people out on the streets

I feel like people were talking about pausing the mortgages at the very beginning and it seems like a good idea and then... that talk just stopped somehow.

"it's going to be over soon, there's no point!"

mortgage stuff was left to the banks -- some banks have made arrangements with borrowers -- again, the mortgage issue isn't the sole factor in re preventing evictions of tenants unable to pay rent.

on a macro level there is the issue of banks having enough cash/reserves to legally make loans -- which we saw with the first wave of PPP loans.

if I was inclined to doompost, which I am not, I would be much more concerned about evictions than secret police or whatever

you're not??

tell that to 2016 simon

fuck that guy

word

;)

https://www.whitehouse.gov/articles/us-economy-remains-resilient-despite-historic-contraction-in-second-quarter/

interest rates near zero means that those with assets can buy up distressed assets as rapidly as possible. the relentless consolidation of wealth finds no obstacle in a mere global pandemic.

pandemic is accelerating every bad feedback loop

having a "bad economy" is impossible right now because there's no such thing as an "economy", there are only the interests of rich people

and hundreds of thousands of GoFundMes ....

https://www.bloomberg.com/amp/news/articles/2020-03-26/why-landlords-might-need-a-coronavirus-bailout

i break it down as:

- "Mom-and-pop investors — those who own two to four rental units" lmao
- they're highly leveraged in a risky business and i have no sympathy for them
- but as a matter of policy, with the short term health of the rental market in mind, it makes sense to cancel mortgages at the same time as cancelling rent (and i haven't seen any serious suggestions otherwise btw)

good policy is often not dependent on who deserves sympathy most imo

In fact many of the flaws in American policy can be traced to excessive parsing of who deserves sympathy.

sure. they don't deserve sympathy but no one is suggesting they don't get mortgage forgiveness afaict.

idk -- maybe my personal experience is just knowing only outliers here, but of the people I know who own two to four rental units, it's less that they own them because they said "hey i want an investment! I am going to buy residential real estate because I saw an ad about it!" and more like the units were places they used to live or a parent used to live, and instead of selling it, they held onto it. ... I guess structurally it's the same, it just seems less douchey the way I put it ... idk lol

they're highly leveraged in a risky business and i have no sympathy for them

how do you define "risky" here? Or is the key phrase for you "highly leveraged"?

Most landlords, after all, are not cold, unthinking corporate entities. They’re overwhelmingly individuals and small business owners.

Seems totally possible many of them are cold, unthinking individuals and small business owners.

That said -- I truly don't see why we shouldn't simultaneously halt their eviction powers and pause their mortgage obligations. The pain of all this should be distributed as widely as possible via the tax power and not just fall on those people unlucky enough to be directly affected. Or so it seems to me.

So there are two things at play here:
one is the debt (mortgage) owed by the landlord -- which, I think I mentioned upthread -- tends to be a long-term debt that could be refinanced, such that landlords won't be looking at the balloon payments the same way things are set up for the tenants who are unable to pay rent, but would be liable for all the back rent once the moratorium expires.

The other thing is the lost income from the rent the tenants owe. So a bailout concept isn't just covering the costs of the property (including the mortgage debt), it's making up for the fact that the landlords were counting on profits from the rental units that they are currently not receiving.

The pain of all this should be distributed as widely as possible via the tax power and not just fall on those people unlucky enough to be directly affected.

This makes excellent sense to me, but we live in a nation where a very large percentage of the inhabitants simply expect to live their lives as they always do in the middle of some of the worst hotspots in a global pandemic, who find wearing a face mask in public enclosed spaces to be an intolerable inconvenience, and they do not care much for this idea. All they want from taxes is to be taxed less and less, so long as this doesn't inconvenience them in any way at all.

I think from a policy perspective, we should assume that there are plenty of cold, unthinking parties involved who have assholish instincts, and policy should be crafted to prevent those assholish instincts from evicting people who lost their jobs due to Covid.

I am fine with having the government pay landlords the lost income and cover mortgage obligations, but they should be required to retain the tenants at their previous rent (plus nominal cost of living increases) in order to receive the funds. ... Now this is a real bureaucratic problem, because of private property rights, for one, and also the fact the IRS sent stimulus checks to dead people ... dealing with getting and processing and correctly analyzing data of tenant rolls could be a real disaster.

how do you define "risky" here? Or is the key phrase for you "highly leveraged"?

― sarahell, Monday, August 3, 2020 12:06 PM (fifty-four minutes ago) bookmarkflaglink

it's risky because, assuming they have a mortgage, they have high, fixed costs relative to the income, the income is an all or nothing thing (it doesn't go up or down a couple of % each day like retail). the upside is enormous, as discussed on this thread, and extremely bad outcomes are rare. but extremely bad outcome = rare does not mean it's not risky.

I was chatting about this with an accountant friend and he explained to my dumb ass that if you canceled mortgage payments the bond market would collapse which would wipe out to a of retirements and pensions. What’s the better plan, I asked? Just give people money, duh!

wipe out a ton of

the problem with giving people money to pay rent is that it tends to make rents go up. seems like giving the mortgage lenders would actually be better in this situation.

Ben Bernanke was derided as 'Helicopter Ben' for making a speech in the 00's in which he said that the best response to some economic crises was to get money into people's hands at any cost, even if you had to dump bushels of money out of helicopters. This is precisely such a situation and the deficit hawks are solidly in the "we must destroy the village in order to save it" camp.

I was chatting about this with an accountant friend and he explained to my dumb ass that if you canceled mortgage payments the bond market would collapse which would wipe out to a of retirements and pensions. What’s the better plan, I asked? Just give people money, duh!

it's a little more complicated than that, retirements and pension funds are somewhat diversified, but ... again, cancelling mortgage payments is not the same as cancelling rent. There are different ways to cancel mortgage payments -- you can essentially refinance the loan so the debt is the same but just pushed back, or you can cancel the payments by reducing the loan by the amount of the payments, which would reduce the amount of assets held by the banks/lenders, which would constrict and damage things like the bond market, which is invested in mortgage backed securities, also, the lower the value of the assets held by the banks (e.g. loans), the less they can lend, thus restricting the flow of money.

the problem with giving people money to pay rent is that it tends to make rents go up.

Increasing the money supply on the order of trillions of dollars will have some side effects, but most of that money will be sopped up by lenders or reabsorbed as taxes later on. Crises happen in present time and must be dealt with immediately. Medium term complications can be sorted out after the crisis has been addressed.

I'm gonna take this phrase by phrase here:

it's risky because, assuming they have a mortgage, they have high, fixed costs relative to the income,

not necessarily. The amount of mortgage debt could be quite low. Also, since the last crisis, underwriters are pretty cautious in terms of the amount of debt they will "enable" -- commercial mortgages (that is mortgages for rental property) require more documentation than a standard homeowner's mortgage ... Property owners are generally required to have a certain number of months of reserves, as well as a certain allowance for vacancies and collections, and loans are often capped at a certain percentage of the value of the property.

the income is an all or nothing thing (it doesn't go up or down a couple of % each day like retail).

not really ... rents can go up and down, some properties (commercial buildings, but these are also involved here) have tenants that pay a portion of profits as part of rent (malls tend to do this). You can do rentals by the month, or week, or convert it to an Air BnB, even (depending on local regulations)

And on a related shitbin topic -- I am wondering about the market for re-packaged PPP loans -- is this a thing yet?

I was rereading the UCLA report on upcoming Covid evictions and am I understanding this correctly?

The number of *just children* that could enter homelessness in the next few months is 300% the last count (66,400) for ALL people experiencing homelessness in LA County?? pic.twitter.com/nSYm2301G3

— josh vredevoogd (@jawshv) August 4, 2020

jeeeesus

Brutal chart by the legendary @byHeatherLong. Cripes almighty that’s some rough business.https://t.co/fhrpoASetC pic.twitter.com/1IZ334gW3p

— Andrew Van Dam (@andrewvandam) August 13, 2020

a playwright once wrote a mediocre 10 minute short play that got done here by friends of mine about a society where only a small, lucky percentage of the "plebeians" get actual "jobs", which all pay pennies an hour. the rest are unemployed and fight for scraps (literally and figuratively)

we're pretty much there rn.

sadly i suspect these are still 'the good times' tbh.

Paying someone under $14 an hour is illegal where I live.

That chart as an article https://www.washingtonpost.com/business/2020/08/13/recession-is-over-rich-working-class-is-far-recovered/

As talks between Republicans and Democrats in Washington have disintegrated

Cool, cool:

https://www.theguardian.com/us-news/2020/aug/14/us-health-insurers-coronavirus-pandemic-profit

Imagine if single-payer had been on the table.

Paying someone under $14 an hour is illegal where I live.

― Zelda Zonk, Thursday, August 13, 2020 4:44 PM (yesterday)

same here! ... the chart also has a regional aspect because of this. Not to be all virtue signalling about "where I live has a higher minimum wage" because where I live is way more expensive, and the people in that chart making $14-20/hr where I live are probably in similar circumstances to the $14 and under group in other parts of the country.

it's actually interesting looking at the chart -- because it looks like the $14-20/hr dipped down prior to the $14 and under, and I wonder if there is a correlation between higher cost of living states (e.g. California, New York, Mass.) going into quarantine/lockdown earlier than lower cost of living states ...

* or maybe it shouldn't be states so much as areas -- I guess my point is, the $14 and under and the $14-20 groups are potentially the same class of workers, just with different pay rates due to regional differences in cost of living, and it is interesting to see those compared in terms of regional responses to Covid.

S&P 500’s forward P/E ratio now sits at highest since mid-2000 pic.twitter.com/R3kCQD4q1J

— Liz Ann Sonders (@LizAnnSonders) August 18, 2020

speculatin' on vaccinatin'